The Central Bank Resolution Authority has updated its resolution plans for Iceland’s three systemically important banks – Arion Bank, Íslandsbanki, and Landsbankinn. The plans cover the execution of bank resolution in the event that their financial position deteriorates to the point that they are deemed failing or likely to fail.
Should a systemically important bank fail, the resolution plan assumes that it will be possible to recapitalise it quickly and securely, and without funding from the Treasury or the Central Bank. Resolution is intended to ensure that households and businesses continue to have unrestricted access to critical functions, thereby supporting financial stability in Iceland.
In updating the resolution plans, the Resolution Authority took decisions on the banks’ minimum required own funds and eligible liabilities (MREL), as is provided for in the Act on Resolution of Credit Institutions and Investment Firms, no. 70/2020. The MREL requirements are based on Act no. 70/2020 and the Central Bank’s MREL Policy. They are intended to support the resolution plans and ensure that it will be possible to resurrect failing banks. The systemically important banks are required to satisfy their MREL requirements at all times.
The systemically important banks’ resolution plans are prepared in accordance with Act no. 70/2020 and the rules and regulations adopted on the basis of that Act. Each resolution plan is based on a resolvability assessment for the bank in question. The assessment involves analysing each bank’s operations and providing a rationale for the resolution action that must be taken should the bank fail, with reference to the objectives of the resolution process. The key objectives of resolution include ensuring that a bank’s failure has as little impact as possible on its customers, minimising reliance on extraordinary public financial support, and minimising the repercussions of a financial collapse.
Press release no. 17/2024
19 November 2024
(Published in Icelandic 4 October 2024).